Deep in the Bitcoin mines

It had to happen: a precious commodity that exists hidden, not deep in the earth, but in the digital realm of ones and zeros. Bitcoin is the latest investment rage, with value that fluctuates wildly from...

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Posted Feb. 16, 2014 @ 12:01 am

It had to happen: a precious commodity that exists hidden, not deep in the earth, but in the digital realm of ones and zeros. Bitcoin is the latest investment rage, with value that fluctuates wildly from day to day.

Algorithm-savvy 20- and 30-somethings who grew up finding keys and crowns in video games are the new miners, using powerful computers to crunch huge numbers. Of the 21 million bitcoins that are supposed to exist in the mathematical universe, they’ve discovered about half.

So Bitcoin, “digital gold,” is real, more or less. There’s a Bitcoin ATM in Vancouver, British Columbia. Another is set to open in Hong Kong — not very convenient to local investors but cash is not the point. Bitcoin is touted by the likes of the Winklevoss twins as a way to obviate the expense of banks, because it is traded and moved around on the Internet without their help, and also the state, which has devalued and even confiscated other currencies at various times in the past and could do so again in the future.

But what is it really? Bitcoin looks a lot like the tulip mania that gripped the Netherlands in the 17th century, and a hundred other bubbles that followed, especially because its value is unmoored to any standard such as gold. Beyond that, it is ripe for all sorts of criminality, having been linked to money laundering and drug- and illegal weapons trading. Indeed, Messrs. Winklevoss and others are calling for the Securities and Exchange Commission to do some regulating, even though it’s hard to say whether that is the SEC’s responsibility.

Nobody knows what the future will bring, and it’s entirely possible that there will be a digital currency someday. But will it be Bitcoin, or will Bitcoin be a footnote in the catalog of folly?